https://www.taxtmi.com/caselaws?id=775223 The ITAT Hyderabad allowed the assessee's appeal on two issues. First, regarding interest paid under Section 50(3) of the GST Act due to input tax credit mismatch, the ITAT held that such interest is compensatory, not penal in nature, and therefore allowable as deduction under Section 37(1). The AO and CIT(A)'s disallowance was directed to be deleted, relying on SC precedent that interest on tax arrears is compensatory. Second, concerning disallowance under Section 36(1)(iii) for interest-free advances, the ITAT found no nexus established between borrowed funds and advances. Following Reliance Industries SC judgment, where interest-free funds are available to cover advances, presumption arises that advances were made from such funds. The disallowance was held unsustainable and directed to be deleted. en-us Fri, 18 Jul 2025 00:00:00 +0530 Tue, 22 Jul 2025 08:25:25 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=775223 The ITAT Hyderabad allowed the assessee's appeal on two issues. First, regarding interest paid under Section 50(3) of the GST Act due to input tax credit mismatch, the ITAT held that such interest is compensatory, not penal in nature, and therefore allowable as deduction under Section 37(1). The AO and CIT(A)'s disallowance was directed to be deleted, relying on SC precedent that interest on tax arrears is compensatory. Second, concerning disallowance under Section 36(1)(iii) for interest-free advances, the ITAT found no nexus established between borrowed funds and advances. Following Reliance Industries SC judgment, where interest-free funds are available to cover advances, presumption arises that advances were made from such funds. The disallowance was held unsustainable and directed to be deleted. Case-Laws Income Tax Fri, 18 Jul 2025 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=775223